A retirement account totaling over $1,000,000 may sound out of your reach right now but with a particular investment strategy it may be closer to your grasp than you first think. While there are many good strategies when it comes to growing an investment account, one that is often overlooked is investing in Real Estate Investment Trusts or REITs.
We’ll spotlight three REITs below that could yield significant gains for your retirement account. But first, what makes REITs so attractive?
Why Buy REITs
A REIT or Real Estate Investment Trust is a company that owns or finances a multitude of income-producing real estate across a wide range of property sectors.
Many REITs trade publicly on the major stock exchanges, making them a great investment opportunity for investors who lack the resources or expertise to buy real estate directly.
And because REITs provide investors with the opportunity to gain exposure to real estate without directly purchasing property, they help to diversify risk while allowing investors to still enjoy the many benefits of the real estate industry.
REITs collectively own more than $3.5 trillion in gross assets and more than 500,000 properties across the United States, so there is ample opportunity to find good deals.
3 REITs To Build a $1,000,000 Retirement Account?
Here are three REITs with proven track records that have the potential to grow your retirement account from $150,000 to $1,000,000 over the next few decades.
Life Storage is a real estate investment trust headquartered in Williamsville, New York. Founded in 1982, the company invests in self-storage units and operates in over 850 locations. With the demand for storage space increasing throughout the United States each year, this REIT is positioned to have a long and prosperous future ahead of itself.
The REIT’s market cap is north of $9 Billion and provides shareholders with a 3.89% dividend yield which translates to about $4.00 per share. The REIT’s 52-week low is $100.89, and its 52-week high is $154.45.
When we examined the health of the firm’s growth, profits and cash flows, it came up trumps on all counts. Better still, the consensus analysts targets for the firm is $148.83, suggesting upside of around 31% from current levels.
Founded in 1973, WP Carey is a real estate investment trust company that specializes in sale-leasebacks, build-to-suits, and the acquisition of existing net leases.
Over the last five decades, the company has continually invested in high-quality real estate properties like single-tenant industrial, warehouse, office, retail, and self-storage properties that are subject to long-term net leases with built-in rent escalators. With a diversified portfolio of over 1,215 net lease properties, WP Carey is also nicely positioned for continued growth over the next decades to come.
WP Carey has a market cap about twice the size of Life Storage, around $16 billion. The REIT also pays shareholders a more generous yield of 5.25% which is around $4.23 per share. Its 52-week low is $73.02, and its 52-week high is $86.48.
The firm’s cash flows and profits are top notch though growth is expected to be slower than that of Life Storage, which is not entirely a surprise given its larger size. Analysts peg fair value about 17% higher ($88.70) than the current price level. Over the next few decades however, expect inflation and economic tailwinds to produce a much greater return for patient investors.
Medical Properties Trust
Based in Birmingham, Alabama, Medical Properties Trust is a real estate investment trust that invests in healthcare facilities subject to NNN leases. An NNN lease is a type of lease agreement on a property where the tenant promises to pay all the expenses of the property, which includes real estate taxes, building insurance, and maintenance.
NNN properties are popular because they offer investors relatively low-risk investment opportunities with a steady income. With over 400 properties and counting across the world, this REIT is positioned well for the future.
Medical Properties Trust has a market cap of $9 Billion and provides its shareholders with a massive 7.75% dividend yield which is around $1.16 per share. Over the past year it has oscillated from a 52-week low is $14.84, to its 52-week high is $24.13.
For those concerned about inflation, 99% of MPW leases have set annual rent increases, making the REIT somewhat resistant to inflation.
Of all the REITs covered in this article, Medical Properties Trust has the highest upside over the short-term with intrinsic value calculated at $20.86, suggesting as much as 39.2% upside. When we examined the financials, we saw attractive growth, profits, cash flows and relative value.
Building up your retirement account to over $1 million can seem like a tall order, especially if you have limited funds, to begin with. However, if you can squirrel away $150,000 of savings, it can be enough to grow a nice-sized retirement account with the power of compound interest. For example, if you decided to invest $50,000 each into the three REITs outlined above, you could potentially grow your investment account to over $1,000,000 over the course of 15-20 years – you don’t need any moonshots or extraordinary annual returns to reach that target.
Each of these REITs has shown longevity and provides shareholders with a significant dividend yield each year. It’s also important to keep in mind that nothing is guaranteed with investing, as the next ten years could show more turbulence than the last ten have. Therefore, it’s always a could idea to invest in REITs and stocks that have proven track records, shown potential for continued growth, and exhibit the ability to evolve with changing economic demands. While investing all of your retirement funds into just these three REITs would be ill-advised, if you have extra cash to invest, these REITs could help you reach $1 million or more in a little over a decade.